The broader S&P 500 plunged 58.33 points (2.96 percent) to 1,913.85, and the Nasdaq Composite gave up 140.40 (2.94 percent) at 4,636.10.

Wall Street followed sharp selloffs in Asia and Europe, after China's official purchasing managers' index fell to its lowest level in three years in August, suggesting the manufacturing sector was contracting.

In Indonesia, International Monetary Fund head Christine Lagarde indicated that the institution was likely to again cut its estimate for world growth this year, after trimming it to 3.3 percent just two months ago.

"The market is in a situation where it can only see reasons to fall. We are adapting to a world where economic growth is going to be slower than believed in recent months, because of the hit from China and the emerging economies," said Gregori Volokhine of Meeschaert Financial Services.

Citigroup and Bank of America led a big fall in banking shares, both sinking about 4.7 percent.

Dow members ExxonMobil lost 4.2 percent and Chevron 3.5 percent as oil prices buckled again under the Chinese data.